Intro to student loan repayment options

There are lots of ways to approach student loan debt. This video gives you an overview of some of your repayment options.

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You may or may
not be aware, but actually,

about three-quarters of students

leave school with some
kind of student loan debt,

so navigating the ins and
outs of repaying student loans
COLLEGE

is pretty much a fact
of life for a lot of folks.
DEBT

But before we get
too far into the details,

let's start with a bit
about the loans themselves.
STUDENT LOAN

There are two basic
types of student loans:

private—which means that your lender
is going to be a private institution,
PRIVATE LOANS, BANK

like a bank, or federal—which means
they’re issued by the government.
FEDERAL LOANS

Most student loans
are some sort of federal loan

so we’ll mostly be focusing on these.

Now, there are two
different kinds of federal loans:

subsidized and unsubsidized.
SUBSIDIZED, UNSUBSIDIZED

Subsidized loans,
for those who qualify financially,

offer better terms.

They’re called subsidized loans

because they’re subsidized
by the US government,

meaning the US government
actually covers the cost
INTEREST, PRINCIPAL, GOV

of interest on these loans during
various periods of the loan’s existence

so you don’t bear the full
weight of borrowing all this money.

With unsubsidized loans,
on the other hand,
PRINCIPAL, INTEREST

you don’t get the same benefits,

and you’re responsible for the
interest on the money borrowed

from the day you take out the loan.

So, for example,

if you choose not to pay your
interest while you’re in school—
ACCRUAL

that interest will accrue.

That is, it will accumulate
from month-to-month.
X MONTHLY INTEREST =

The interest will be added
to your principal every month,

and the next month, your previous
month’s balance will be used

to calculate the amount
of interest that will be added.

This can cause your
principal balance to grow

exponentially when
you don’t make payments.

Now right after you leave school,

the government might offer you
a “grace period” of around six months

where you don’t have to start
paying back your loans right away.

This can allow you some
time to figure out what’s next—

whether it’s finding the
right job or going back to school.
COLLEGE

During this period,
like while you’re in school,
GRACE PERIOD, INTEREST COVERED
INTEREST, PRINCIPAL, MOST SUBSIDIZED LOANS*

the government covers your
interest on most subsidized loans,
INTEREST NOT COVERED
INTEREST, PRINCIPAL

except direct subsidized loans
*EXCEPT DIRECT SUBSIDIZED LOANS
THAT WERE ISSUED BETWEEN

that were issued between
July 2012 and July 2014…
JULY 1, 2012 – JULY 1, 2014

and unsubsidized loans.
AND UNSUBSIDIZED LOANS

Now let’s look at some of the
repayment options you have.
PAY AHEAD OF SCHEDULE
PAY ON SCHEDULE

You basically have four options here
PAY BASED ON INCOME
DELAY PAYMENT

and we’ll go over some
of these in detail in other videos.

First, you can pay ahead of schedule,
PAY AHEAD OF SCHEDULE
INTEREST, PRINCIPAL

where if you’ve got the money
ADDITIONAL PAYMENTS

you can pay more than
your monthly payment

on any type of repayment plan.

Doing so will save you
in interest over time.

Or, you can pay on a schedule
STANDARD 10-YEAR PLAN
GRADUATED 10-YEAR PLAN

either with a standard ten-year plan
$0, $300, 10 YEARS

or a ten-year graduated plan.
$0, $170, $510 10 YEARS

The standard plan
is basically the default

plan for paying back your loans.

Your monthly payment
is fixed over a ten-year period

and it’s one of the quickest
ways to pay down your loans.

With the graduated plan,

you’re paying off your loan
in the same amount of time,

but your monthly
payments start out small

and increase every two years.

You can also pay
on an income-based plan.
INCOME-BASED REPAYMENT
PAYCHECK

This can be helpful if
you can’t afford to make

the monthly payments
on a standard ten-year plan.

If you’re eligible,

your monthly payment

is determined by how much you earn.
$0, $55, 25 YEARS

You also may have
the option of delaying

your payment with
deferment or forbearance

if you’re in a situation where you
really can’t make any payments at all.

Common examples of this would be

if you have some
sort of financial hardship,
BILL, PAST DUE

or if you decide
to continue your education.

Now keep in mind that <i>not</i> paying back

your student loans is <i>not</i> advisable.

Even missing payments
can affect your credit score.
CREDIT SCORE, 675, 620

And, after only a
few months of missing payments,

your loans may go into <i>default</i>,
STUDENT LOAN, DEFAULT

which can have major consequences.

By this point, you
won’t have the option
DEFERMENT, FORBEARANCE

of putting your loans
into deferment or forbearance.

The balance on your loan
can become immediately due
DUE NOW

and in some cases

the government can even
take the money you make
PAYCHECK, GOV

from your employer
to pay off your loan.

It can also be really
bad for your credit score,
CREDIT SCORE, 530

so going into default is
something you really want to avoid.

One last caution
about student loans:
OTHER LOAN, DEFAULT
STUDENT LOAN, DEFAULT

filing for bankruptcy,

which can result in the
forgiveness of some types of debt,

does not generally allow your
student loans to be forgiven.

So if you know you
won’t be able to pay off your loan,
BILL

you should contact
your lender immediately

and they can help
you review your options.

You may or may
not be aware, but actually,

about three-quarters of students

leave school with some
kind of student loan debt,

so navigating the ins and
outs of repaying student loans
COLLEGE

is pretty much a fact
of life for a lot of folks.
DEBT

But before we get
too far into the details,

let's start with a bit
about the loans themselves.
STUDENT LOAN

There are two basic
types of student loans:

private—which means that your lender
is going to be a private institution,
PRIVATE LOANS, BANK

like a bank, or federal—which means
they’re issued by the government.
FEDERAL LOANS

Most student loans
are some sort of federal loan

so we’ll mostly be focusing on these.

Now, there are two
different kinds of federal loans:

subsidized and unsubsidized.
SUBSIDIZED, UNSUBSIDIZED

Subsidized loans,
for those who qualify financially,

offer better terms.

They’re called subsidized loans

because they’re subsidized
by the US government,

meaning the US government
actually covers the cost
INTEREST, PRINCIPAL, GOV

of interest on these loans during
various periods of the loan’s existence

so you don’t bear the full
weight of borrowing all this money.

With unsubsidized loans,
on the other hand,
PRINCIPAL, INTEREST

you don’t get the same benefits,

and you’re responsible for the
interest on the money borrowed

from the day you take out the loan.

So, for example,

if you choose not to pay your
interest while you’re in school—
ACCRUAL

that interest will accrue.

That is, it will accumulate
from month-to-month.
X MONTHLY INTEREST =

The interest will be added
to your principal every month,

and the next month, your previous
month’s balance will be used

to calculate the amount
of interest that will be added.

This can cause your
principal balance to grow

exponentially when
you don’t make payments.

Now right after you leave school,

the government might offer you
a “grace period” of around six months

where you don’t have to start
paying back your loans right away.

This can allow you some
time to figure out what’s next—

whether it’s finding the
right job or going back to school.
COLLEGE

During this period,
like while you’re in school,
GRACE PERIOD, INTEREST COVERED
INTEREST, PRINCIPAL, MOST SUBSIDIZED LOANS*

the government covers your
interest on most subsidized loans,
INTEREST NOT COVERED
INTEREST, PRINCIPAL

except direct subsidized loans
*EXCEPT DIRECT SUBSIDIZED LOANS
THAT WERE ISSUED BETWEEN

that were issued between
July 2012 and July 2014…
JULY 1, 2012 – JULY 1, 2014

and unsubsidized loans.
AND UNSUBSIDIZED LOANS

Now let’s look at some of the
repayment options you have.
PAY AHEAD OF SCHEDULE
PAY ON SCHEDULE

You basically have four options here
PAY BASED ON INCOME
DELAY PAYMENT

and we’ll go over some
of these in detail in other videos.

First, you can pay ahead of schedule,
PAY AHEAD OF SCHEDULE
INTEREST, PRINCIPAL

where if you’ve got the money
ADDITIONAL PAYMENTS

you can pay more than
your monthly payment

on any type of repayment plan.

Doing so will save you
in interest over time.

Or, you can pay on a schedule
STANDARD 10-YEAR PLAN
GRADUATED 10-YEAR PLAN

either with a standard ten-year plan
$0, $300, 10 YEARS

or a ten-year graduated plan.
$0, $170, $510 10 YEARS

The standard plan
is basically the default

plan for paying back your loans.

Your monthly payment
is fixed over a ten-year period

and it’s one of the quickest
ways to pay down your loans.

With the graduated plan,

you’re paying off your loan
in the same amount of time,

but your monthly
payments start out small

and increase every two years.

You can also pay
on an income-based plan.
INCOME-BASED REPAYMENT
PAYCHECK

This can be helpful if
you can’t afford to make

the monthly payments
on a standard ten-year plan.

If you’re eligible,

your monthly payment

is determined by how much you earn.
$0, $55, 25 YEARS

You also may have
the option of delaying

your payment with
deferment or forbearance

if you’re in a situation where you
really can’t make any payments at all.

Common examples of this would be

if you have some
sort of financial hardship,
BILL, PAST DUE

or if you decide
to continue your education.

Now keep in mind that <i>not</i> paying back

your student loans is <i>not</i> advisable.

Even missing payments
can affect your credit score.
CREDIT SCORE, 675, 620

And, after only a
few months of missing payments,

your loans may go into <i>default</i>,
STUDENT LOAN, DEFAULT

which can have major consequences.

By this point, you
won’t have the option
DEFERMENT, FORBEARANCE

of putting your loans
into deferment or forbearance.

The balance on your loan
can become immediately due
DUE NOW

and in some cases

the government can even
take the money you make
PAYCHECK, GOV

from your employer
to pay off your loan.

It can also be really
bad for your credit score,
CREDIT SCORE, 530

so going into default is
something you really want to avoid.

One last caution
about student loans:
OTHER LOAN, DEFAULT
STUDENT LOAN, DEFAULT

filing for bankruptcy,

which can result in the
forgiveness of some types of debt,

does not generally allow your
student loans to be forgiven.

So if you know you
won’t be able to pay off your loan,
BILL

you should contact
your lender immediately

and they can help
you review your options.

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